Intermarket Analysis for operational purposes is useful because the markets are related to each other and the performance of a security, a future or a currency can be indicative to understand the performance of an index or a commodity placed in another market.
Perhaps not everyone knows that financial markets are closely linked to each other. Or, perhaps, many people know it but they do not give this "linkage" the right weight. Instead, it is important to know that the markets are related to each other and that the performance of a security, a future or a currency can be indicative to understand the performance of an index or a commodity placed in another market.
Premise: the topic, as you can easily imagine, is vast and complex. In this article I will try to summarize trying to make the concepts as clear as possible.
For example: we all know that each state periodically issues bonds to finance its public debt. US government bonds are called Treasuries, and among them are Treasury bonds (abbreviated T-bonds). These securities have the characteristic of being long-dated (30 years) and guarantee, like all of them, a fixed interest. Now, it must be said that T-bond prices are influenced by the rate of inflation.
In the commodity market, their prices are evaluated as signals of anticipation of the inflation rate; so following the commodities market can allow us to understand in advance what will happen in the bond market.
Commodity and bond prices usually move in the opposite direction, so rising or falling commodity prices will almost certainly lead to a movement in the opposite direction of the value of T-bonds.
Commodity prices, in turn, are influenced by the US dollar. Normally if the US dollar is on the upside all commodities, starting with gold, are down. In addition, the change in the US dollar also affects the stock market: yes, because if the dollar is strong, heavily capitalized securities suffer as the cost of their products on foreign markets increases, while they benefit from it small-cap securities.
In conclusion: the fluctuation of the US dollar affects commodity markets which, in turn, affect the bond market.
The performance of the dollar also influences the various indices of the stock market.
Moral of the story: we must not fall into the error of thinking that every single financial market is a reality in its own right; the financial markets, I repeat, are related to each other, and those who operate even on a single market must still learn to follow the others to make their own operational decisions in the best possible way.